Hard Money Loans: How long is the Financing Period?

Hard money lenders are concerned with the value of the property and not the credit of the borrower. Bellow hard money example and basic terms.

last updated Friday, April 11, 2025
#Hard Money Loans #Real estate Property

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by John Burson

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How do you finance your short-term real estate investment projects? Hard money loans provide a quicker alternative to bank loans and are secured by real estate. These loans differ from traditional mortgages that run for 10 or 30 years.
Getting a conventional mortgage on vacant or distressed real estate is very difficult. As a result, these loans are often used by most real estate investors, especially for new acquisitions.

Hard money example

A real estate investor stumbles upon an apartment complex that is being sold. It happens that the complex is vacant and in complete despair. We all know getting a mortgage on a vacant or distressed property is impossible. So, what can the real estate investor do?

This investor has two options:

1. Getting a loan from a friend, family member, or partner.
2. Getting a hard money loan to purchase the property. The money is also used to cover the expenses incurred when repairing the apartment complex.

After the real estate property is rehabbed and is ready for rental, the investor can get a conventional mortgage to repay the hard money loan.

Note that the credit isn’t envisioned as permanent traditional financing. Those new to hard money loans must remember to use the loans for short-term plays and not long-term holds.

Example of hard money loan terms

Private investors (or their accounts) financed the loans, not conventional lenders like credit unions or banks. Usually, the terms are around 12 months, but the loan terms can be extended to longer terms of two to five years.  The borrower must pay monthly interest payments and a portion of the principal. The balloon payment is made at the end of the loan’s term.

The amount lenders can offer a borrower is often based primarily on the subject’s property value. Maybe the borrower owns the property and wants to use it as collateral, or it may be a property the borrower wishes to acquire.

Notes:

Hard money lenders are not concerned about your credit records but the property's value. Borrowers who can’t get financing from credit unions or banks because of a recent short sale or foreclosure can still get a loan if they have adequate equity in the property used as collateral.

 
 
 

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